As pretty well everyone in the industry already suspected, Electronic Arts Inc. has now publicly confirmed an agreement to acquire PopCap Games. Well-known for its blockbuster titles like Plants vs. Zombies, Bejeweled, and Zuma, and a proven ability to create new hits, PopCap is a leader in the fast growing market for casual digital games with locations in Dublin, Vancouver (which creates all those PopCap Hidden Object titles), Seattle, San Francisco, Shanghai and Tokyo.

PopCap Games was founded eleven years ago by John Vechey, Jason Kapalka and Brian Fiete, three young gaming geeks who followed their passion – to make games. John and Brian met when they were both attending Purdue University before working for Sierra. Meanwhile the token Canadian in the trio, Jason, graduated from the University of Alberta and had worked as a Senior Producer for Pogo.com – another casual game portal that was swallowed up by the EA publishing empire just as PopCap was getting its start.

“EA and PopCap are a compelling combination,” said EA CEO John Riccitiello. “PopCap’s great studio talent and powerful IP add to EA’s momentum and accelerate our drive towards a $1 billion digital business. EA’s global studio and publishing network will help PopCap rapidly expand their business to more digital devices, more countries, and more channels.”

“We picked EA because they have recast their culture around making great digital games,” said David Roberts, CEO of PopCap. “By working with EA, we’ll scale our games and services to deliver more social, mobile, casual fun to an even bigger, global audience.”

“PopCap has a proven financial trajectory with sustained revenue growth and double-digit operating margins,” said EA CFO Eric Brown. “On a non-GAAP basis, this deal is expected to be at least ten-cents accretive in fiscal year 2013.”

PopCap is one of the largest and most respected digital and social gaming companies with more than 150 million games installed and played worldwide on platforms such as Facebook®, RenRen, Google™, iPhone™, iPad™ and Android. In calendar year 2010, approximately 80% of PopCap’s revenue was on high growth digital platforms.

EA will pay approximately $650 million in cash and $100 million in shares of EA common stock to be issued to certain stockholders of PopCap. In addition, the PopCap sellers are entitled to additional variable cash consideration, contingent upon the achievement of certain non-GAAP earnings before interest and tax (“EBIT”) performance milestones through December 2013, EA’s third fiscal quarter end.

At the upper end of the earn-out, the performance targets for EBIT are approximately $343 million in total PopCap standalone EBIT generated over the two-year period through December 2013. The exact earn-out calculation is subject to adjustments. EA will also provide up to $50 million in long-term equity retention awards to PopCap employees to be granted over the next four years.

Transaction and Financial Highlights

* The transaction is expected to close in August 2011, subject to customary closing conditions, including regulatory approvals.

* On a non-GAAP basis, the acquisition is expected to be EPS neutral to EA’s fiscal year 2012 results, as a result of one-time transaction costs, and at least $0.10 accretive to EA’s FY 2013 non-GAAP EPS.

* For the first quarter of fiscal year 2012, EA is announcing preliminary results of approximately:

*$500 million to $525 million in non-GAAP revenue versus guidance of $460 million to $500 million of non-GAAP revenue.

* ($0.40) to ($0.37) in non-GAAP diluted loss per share versus guidance of ($0.49) to ($0.44) in non-GAAP diluted loss per share.

EA is reaffirming its full year fiscal year 2012 non-GAAP guidance of $0.70 to $0.90 diluted earnings per share. EA is also increasing its full year non-GAAP revenue guidance to a range of $3,800 million to $4,025 million to account for the inclusion of PopCap for a portion of FY12. EA is announcing preliminary guidance for the second quarter of fiscal year 2012 of non-GAAP diluted loss per share ranging from ($0.15) to ($0.05).

In addition, the $600 million share repurchase program that EA announced in February, 2011 remains in effect. As of July 1, 2011, EA has repurchased 7.1 million shares for a total of $149 million under this program. EA is not obligated to repurchase any specific number of shares under the program and the repurchase program may be modified, suspended or discontinued at any time.